Time to Buy into China and Brazil?


Jim Jubak Image Jim Jubak Founder and Editor, JubakPicks.com

These 2 emerging markets have been outpacing the US market for a month—that’s a trend that could make us some money. Here’s why it’s almost time to buy in.

It’s early. The results are open to revision and interpretation. And one month doesn’t make an investable trend any more than a single swallow makes a spring.

But have you noticed? In the past month, emerging stock markets, such as China and Brazil, have outperformed the US market.

And that’s an absolute turnaround from results in 2010 and for most of 2011.

Does it mean that we’re about to reverse the pattern that’s held for more than a year and see emerging markets start to outperform developed markets? Well, sort of.

The picture right now shows that the outperformance is limited to some emerging markets, and even in those markets, the outperformance is spotty. But I think there’s the beginning of a trend here that your portfolio needs to respect.

And because it’s so early, you need to pay attention to what kinds of stocks in these emerging markets investors are willing to buy right now.

Here’s the data:

  • US markets: For 2010, the S&P 500 was up 15.02%. For 2011, as of November 15, the S&P 500 was up 1.65%. In the past three months, it gained 5.05%. In the past month, 2.85%.
  • Brazil: For 2010, the iShares MSCI Brazil Index ETF (EWZ) was up 7.69%. For 2011, as of November 15, it was down 19.54%. In the past three months, the loss was a more modest 2.80%. In the past month, the index climbed 4.35%.